Budget Tax cuts, great news yet calls for a slight change in investment strategy May 2005 RETURN
Whether Mr. Costello is gunning for higher office or not, this is one of the more friendly budgets in memory for middle income earners. Too many “Average Joes” were taxed as rich and carried a tax burden beyond there true position, especially single income families. We also welcome any relief from the disincentives for those who strive to get ahead or fund their own retirement. For the 1st time in memory we face a substantial increase to the top taxation thresh hold, upped to $95,000 and followed by a further increase to $125,000 in 2006. That aside it puts a different slant on the cost of funding property investment. With a high amount of middle income earners taxed at the top rate, the average investor has used massive tax refunds to help fund the shortfall.
Most investors will now be in a lower tax environment and less tax means less refund. This may mean a funding shortfall of $20—$30 per week per property held. This should not greatly effect the small one off investor yet will certainly impact those with significant holdings. Accordingly we may see a trend to property selection bent more to income yields as opposed to potential non cash deductions such as depreciation. The advantage of buying new property will not be as substantial and may increase the attraction of existing blue chip property. One thing is for sure that when one is taxed less, one has more choices in expenditure and I am sure higher net income received will outweigh minor refund losses. It just may stimulate the return of the investor en mass, which leads to higher demand, leading to higher prices, leading to ...
Whether Mr. Costello is gunning for higher office or not, this is one of the more friendly budgets in memory for middle income earners. Too many “Average Joes” were taxed as rich and carried a tax burden beyond there true position, especially single income families. We also welcome any relief from the disincentives for those who strive to get ahead or fund their own retirement. For the 1st time in memory we face a substantial increase to the top taxation thresh hold, upped to $95,000 and followed by a further increase to $125,000 in 2006. That aside it puts a different slant on the cost of funding property investment. With a high amount of middle income earners taxed at the top rate, the average investor has used massive tax refunds to help fund the shortfall.
Most investors will now be in a lower tax environment and less tax means less refund. This may mean a funding shortfall of $20—$30 per week per property held. This should not greatly effect the small one off investor yet will certainly impact those with significant holdings. Accordingly we may see a trend to property selection bent more to income yields as opposed to potential non cash deductions such as depreciation. The advantage of buying new property will not be as substantial and may increase the attraction of existing blue chip property. One thing is for sure that when one is taxed less, one has more choices in expenditure and I am sure higher net income received will outweigh minor refund losses. It just may stimulate the return of the investor en mass, which leads to higher demand, leading to higher prices, leading to ...